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Sarah Brennan is a US corporate and securities lawyer and serves as General Counsel for Delphi Ventures, a venture capital firm focused on Web3 investments. With 14 years of experience in corporate securities law, she became active in the digital assets space in 2017. Brennan is also a co-founder of the LeXpunK project, focusing on legal advocacy for decentralized communities.
In an exclusive discussion with Global Crypto News, Brennan shared her insights on crypto super PACs, failed regulation, and the risks of recreating the traditional financial system within the crypto space.
Major Institutions: A Double-Edged Sword
Crypto companies like Ripple and Circle have raised over $100 million to fund congressional campaigns in response to stringent regulations from the SEC and the Biden administration, including the controversial SAB 121 crypto bill. Brennan believes these actions reflect attempts to isolate the crypto sector from the broader financial system.
“I personally think the SAB 121 is reflective of the Biden admin’s various attempts to cut us off from the broader financial system,” Brennan tells Global Crypto News. “Ultimately, it seems that while the Biden campaign wants our votes, they do not want to be accountable to us on policy.”
While Brennan supports younger, digitally native candidates in politics, she expresses concerns over the lobbying efforts by major players. She worries about the political momentum and its impact on decentralized communities, which are least able to protect themselves politically.
“We need more creative attempts at regulating that are reflective of the paradigm shifts in crypto,” she says. Brennan believes that large centralized institutions as the predominant voice in crypto are a double-edged sword, posing the risk of recreating traditional financial market structures.
She describes the centralization of political power as antithetical to the ethos of the crypto space, emphasizing the need for a regulatory system that does not rely on intermediaries and rent-seeking gatekeepers.
Centralized Crypto: Monopolists Like Never Before
Brennan explains the dangers of consolidating power among a few major crypto players.
“Without any legislative or regulatory counterbalances, we can fall prey to becoming a veritable hellscape where large centralized actors are positioned to become monopolists like we have never seen,” says Brennan.
She warns that these actors can vertically integrate and dominate everything from infrastructure like L1s, nodes, and wallet apps to traditional businesses like trading platforms and market-making arms. According to Brennan, a centralized future in crypto would replicate the issues of the existing financial system without adding societal value.
Even without centralizing regulation, crypto could be undermined by the concentration of ownership by major institutions. Brennan reminds us that crypto (Bitcoin) emerged as a reaction to the 2008/09 financial crisis and the “too big to fail” monopolists of the traditional financial system.
SEC Regulation: A Failed Legacy
According to Brennan, large institutions in crypto should be regulated similarly to traditional finance entities. However, the current regulatory landscape lacks clarity, incentivizing bad business practices.
Brennan criticizes SEC Chair Gary Gensler for focusing on politics rather than effective policy outcomes, leading to a regulatory environment that disincentivizes good practices.
“Gensler’s legacy has been going after good actors and disincentivizing good practices in the space,” Brennan states. “Compliance is often at odds with the business case.”
She argues that the harm caused by Gensler’s approach stems from a lack of a clear policy framework that provides a path for compliance.
Radical Advocacy: Crypto Lawyers Fighting Back
Brennan co-founded LeXpunK, a cryptolaw advocacy and funding group, to bring together lawyers, crypto industry professionals, developers, and investors. The group aims to create new legal frameworks and proposals for regulators to consider.
In 2022, Brennan and her co-authors drafted a framework aimed at allowing token projects to legally issue crypto tokens without falling afoul of securities law. The proposal was discussed in a congressional committee on Fintech in 2023, but it has yet to gain traction.
Brennan believes that crypto regulation should focus on pre-emptive antitrust enforcement to prevent institutions from becoming “too big to fail.” By preventing monopolies, supporting decentralization, and targeting criminals rather than the technologies they use, regulators could help foster a safe and thriving digital assets economy.
At the time of writing, Brennan is working on a new advocacy initiative to continue her support for decentralized communities. Stay updated with more news on Global Crypto News.
